The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Look like we're in final negotiations now gents.
The Iraqi Oil Minister says that the only thing left to do is to agree on the cost of production and transportation of Kurdistan oil. Regarding natural gas, he said Kurdistan gas is 30% cheaper than imported from Iran.
"We are ready to produce and immediately export [the Kurdistan Region's] oil, which will benefit the Kurdistan Region, oil companies and the Iraqi state," Iraqi Oil Minister Hayan Abdul Ghani told US television channel Al-Hurra.
Not what I argued, was it? Traders buying from DNO/SNM/GKP have different end markets (and yes, they also sell some volume directly to refiners). Last week, DNO stated that the selling price was up +10% QoQ locally. Can't explain that by looking at prices for Diesel in Iraq, can we?
Again, another pretty outrageous comment said with outmost confidence.
First, we know that traders take a substantial of volume from DNO/GKP/SNM and truck it abroad: their ability to price (bid) depends on their ability to sell it abroad.
Secondly, the refiners compete with other local sources of crude; and do you really argue that if that was priced at $120, they would still not pay a single cent more to GKP/DNO/SNM as if local prices was at $40?
To say it doesn't correlate 1:1 is fine, or to say it comes with a lag is fine - but to argue there's no correlation at all to international brent is ludicrous.
EIA link on pipelines: https://www.eia.gov/international/content/analysis/countries_long/Iraq/iraq_bkgd.pdf
EIA pipeline info: page 5. It's the part going from Kirkuk to the border being repaired: if anything it adds incremental capacity.
Total capacity of 1.5 million of barrels per day to Turkey still stands, and Iraq and absolutely not Kirkuk can fill that anytime soon.
Furthermore, here's a presentation from SOMO in Germany last year: https://www.numov.de/wp-content/uploads/2022/09/Oil-and-Gas-Sectors-In-Iraq-ver-16.pdf
Iraq is building, and planning to build, plenty of capacity throughout the country for exports.
Plenty of room for the IOCs to fill up their entire production imho.
What's important now is that Baghdad, KRI and IOCs settle on some contracts. Pipelines are a smoke screen.
From my understanding, both pipes (40" and 46") are fully working on the Turkey side. If Iraq now repairs the lines down to Kirkuk, one might assume they repair both the 40 & 46 thus the capacity is 1.6 million/d - plenty of capacity.
Here we go gents: https://www.iraqinews.com/iraq/iraqi-kurdistan-president-confirms-reaching-agreement-on-oil-exports/
Two years ago when Brent was at $80 (now $91) and GKP in $-30m net debt (now $+86 net cash) Stifel Research (non-paid research) attached a £361p target price on GKP (close to 20% (!) discount rate).
https://i.imgur.com/3OwxsA3.png
When the IOCs write their new PSCs with SOMO we get the same terms as Exxon/Total and the riskpremium cut in half. Furthermore, no more -15% discount on crude sold because it was from KRI, which no one wanted to touch besides Turkey.
A normal discount-rate and sector-peer multiples will put most target prices above 400p (IMHO).
PUTUP claiming GKP to be "drastically overvalued at 95p" provides me with a fantastic entry point, and will make for great comedy in a couple of months.
// Strong Buy since 91p (that's when I entered this part of the forum, if you look at my entire history).
Back to 150! Should be min. 200p excluding MPNU and 300p. including MPNU.
DNO today:
"Given shortages of heavier crudes in regional markets, DNO negotiated with its customers to nudge Tawke/Peshkabir prices to the mid-USD 30 per barrel level. DNO share of sales continue to be paid directly to the Company in advance of loadings."
Looks like a tight market. We're going up, gents.
DNO which had 'low $30s' as realized local prices in Q4, reports today that they have nudged up the prices to 'mid $30s' via negotiations.
Https://www-nrttv-com.translate.goog/detail/35707?_x_tr_sl=ckb&_x_tr_tl=en&_x_tr_hl=sv&_x_tr_pto=wapp
"The two Iraqi Oil Ministries and the Kurdistan Regional Government (KRG) are in talks on their agreements on oil exports and the understandings are expected to have positive results in the near future. "The priority of the Iraqi government is to resolve the oil issue through legal and constitutional means and for this purpose they have met with Turkey to determine the transportation fee for a barrel of oil,"
I have tried to summarize the public comments about the deal in this sheet (link): https://i.imgur.com/Ct7oPZp.png
From what I can tell, there are no major objections in either 2023 and 2024 against the deal. It was also somewhat of a relief to read the paragraphs of the Exxon/NNPC JOA as it explicitly only states participating interests . Here's a link to that article: https://www.thisdaylive.com/index.php/2022/08/12/exxonmobil-seplat-deal-when-a-regulator-misinterprets-the-law
Friendly reminder that a +10% in Brent increases the profits with approx. $93m i.e. almost +70% YoY, based on 2023 numbers.
Link: https://i.imgur.com/xZ7sHW3.png
This does not included Abiele field, Sibir field, ANOH, MPNU or Sapele that all are coming online late 2024.
Somewhat a relief reading Bloomberg today, that all majors having issues finalizing their deals. Nigerian regulator gave a final assuring comment in the end.
(I would be more worried if it was only Seplat)
Bloomberg:
Oil Majors Frustrated by Slow Progress of Nigerian Asset Sales
Exxon Mobil Corp. agreed to sell its shallow-water oil assets to Seplat Energy Plc almost two years ago, but the transaction has yet to complete amid objections from state-owned Nigerian National Petroleum Co. Eni SpA and Equinor ASA are also waiting for regulatory approval to finalize the sale of Nigerian assets.
There is an “urgent need to conclude these transactions,” Osagie Okunbor, managing director of Shell Nigeria, said at a conference in Abuja this week.
Abdulrazaq Isa, chairman of Waltersmith Petroman Oil Ltd. — which is part of the Renaissance consortium acquiring Shell’s assets — said that approving the deals would help revive Nigeria’s flagging oil industry.
“This remains the most realistic and successful avenue to bolster national crude oil production by the turn of the decade,” said Isa, speaking as head of an association of indigenous oil producers.
Exxon said delays in approving the sale of its assets to London-listed Seplat were causing uncertainty for the communities and contractors that depend on those operations.
“It’s imperative that it’s concluded and that clarity is provided to everyone involved,” Exxon Nigeria Chief Executive Officer Shane Harris said at the same conference. “What’s really important is it helps resolve a significant amount of uncertainty that currently clouds thousands of people.”
Oando Plc’s acquisition of Eni’s Nigerian unit, which has interests in onshore oil and gas blocks and power generation, has been challenged by NNPC over the failure to obtain prior authorization.
“We do need the reviews, consent to come quickly,” said Oando Executive Director Ainojie Alex Irume. “We do need to get on these assets and start working on them.”
The departure of international oil majors from onshore operations in Nigeria has coincided with years of declining investment in the industry. The regulator said there was no lack of urgency on its part in approving deals.
“So let the message be taken home that the regulator is in no way trying to be a show-stopper in this respect,” said Gbenga Kommolafe, CEO of the National Upstream Regulatory Agency.
I've expanded some more on the sheet, and you can find it here: https://1drv.ms/x/s!ApeYQTMwoUrPpF83mGOuuHxsSkOJ
I'm taking huge margin of safety's on both production levels and costs, but it still trades at approx. 2x next years earnings, assuming MPNU acquisition. Without my reservations on all these lines, 1.5x is probably closer to the truth.
Am I the only one seeing +100% upside here?
I produced a quick sketch on how the MPNU acquisition will impact the P&L.
https://i.imgur.com/VKYjIRQ.png
This is not an all-encompassing sheet (obviously), but it's fair to say the end-result will be absolutely massive.
I appreciate you helping PUTUP with his lacking mathematical skills. Bless
Cost recovery pool is now at 120% of current enterprise value 🤑💵
If Brent continues to trade around $90/bbl I wouldn't be surprised if GKP could negotiate its selling price up to $33/bbl. Operating leverage is exceptional coming from low levels, and it would elevate yearly free cash flow from $60m to $90m.🚀
Never retesting 90p again.
Shares approaching flat post conference call. Good sign!